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Where does the government get the money from? From taxpayers like you, of course.
However, some Type of tax It provides federal, state, and local governments with far more revenue than any other.
Recently, the Tax Foundation took a deep dive into the data to reveal which taxes give governments the most money. Below are the top sources.
1. Personal Income Tax
Government revenue as a percentage of total U.S. tax revenue: 42.1%
Federal, state, and local governments can all collect income taxes, which are taxes on income received by individuals and businesses.
At the federal level, US taxes are progressive, generally the more money you make, the higher percentage of your income you pay in tax.
States and local governments have their own ways of taxing people. Some have a progressive tax system, while others have a uniform tax system in which everyone pays the same tax rate regardless of income.
Some state and local governments impose no income tax at all.
2. Social security tax
Government revenue as a percentage of total U.S. tax revenue: 23.8%
social security tax These taxes are used to fund the country’s social security programs, which provide retirement, disability and survivor benefits to eligible workers and their families.
If you work for someone else, your employer pays 6.2% of your wages in Social Security tax and you pay the remaining 6.2%. The self-employed pays her 12.4% in full out of pocket.
Social Security tax only applies to wages up to $160,000 in 2023.
3. Consumption tax
Government revenue as a percentage of total U.S. tax revenue: 16.6%
Consumption tax is a tax that you pay when you purchase goods and services. Unlike many other countries, the US does not have a sales tax.
However, at the state and local level, millions of Americans regularly pay sales taxes.
Other sources of tax revenue
Other commonly paid taxes are:
- Property taxes: 11.4% of total U.S. tax revenue
- Corporate tax: 6%
- Other taxes: 0.1%